As much as AT&T is playing it cool regarding multi-carrier iPhone deals, when other US carriers offer the iPhone AT&T will loose subscribers and suffer an estimated 30 percent drop in profits.

AT&T’s mobility chief Ralph de la Vega admitted to analysts on a conference call last month that the carriers’s exclusive grip on the iPhone distribution in the U.S. is coming to an end. Although the chief executive didn’t reveal when AT&T’s deal with Apple will expire, he did unambiguously say that it’s only a matter of time. De la Vega expressed hopes that non-iPhone subscribers will continue adding up to the revenue “after the iPhone is no longer exclusive,” Computerworld reported. The executive tried to convince analysts during the Q&A session that AT&T is prepared for such a scenario:

President & CEO Randall Stephenson.

Even if we lose exclusivity, we will be the only carrier with HSPA 7.2Mbps and new devices will work on our network faster. I feel as strongly as ever about the capability of devices in our lineup and I’m super-excited about the deals with e-readers and personal navigation devices.

AT&T reported 3.2 million iPhone activations in the third quarter, representing a whopping 43 percent of the 7.4 million iPhone units that Apple sold around the world in its last quarter. AT&T said that iPhone subscribers generated one-third of the total revenue from all devices in the quarter. De la Vega told analyst that other device vendors are still trying to catch up with Apple:

I never understated the capability that Apple has. It’s all about making it simple for customers to use the services. Others will try to emulate them, but that device by far is the best in terms of ease of use.

The aftermath

Despite AT&T’s rosy outlook and kind words it has for Apple, most analysts warn that Apple’s multi-year exclusive agreement deal with AT&T is expiring mid-2010. If you ask me, AT&T is too confident about its portfolio of devices being able to make up for the one third iPhone revenue. Analysts spell trouble for AT&T when other US carriers get the iPhone, namely its arch-rival Verizon.

Piper Jaffray analyst Christopher Larsen draws parallels with France where Apple’s market share climbed to 40 percent following multi-carrier deals, up over just 15 percent when the iPhone had been an Orange exclusive. Larsen has no doubt that AT&T will bleed once its exclusive deal with Apple expires.

With 35 percent of AT&T’s iPhone sales coming from new customers, we feel it is reasonable to assume the company’s total iPhone sales could decline by 30 percent or more and that Verizon could pick up the bulk of this lost share (why switch to AT&T for iPhone if you haven’t left by now and the device is available through your carrier; Verizon’s network quality could be a reason to switch from AT&T).

Some watchers doubt that Verizon will get the iPhone anytime soon, citing anti-AT&T and anti-Apple ads that have bashed the Cupertino firm up to the point of mutual animosity. There’s no doubt in my mind that the iPhone will arrive on both the Verizon and T-Mobile network. I find it hard to imagine that both carriers would pass the opportunity to add this money-making device to their portfolios. On the other hand, it’s true that AT&T’s portfolio sports other nice devices, including a range of BlackBerries, the GPS-focused Garmin Nuvifone G60, and the latest HTC Pure and Tilt 2 Windows Phones. AT&T was scheduled to deploy HTC Lancaster, its first-ever Android phone, on August 3 but missed the launch.

AT&T hopes its portfolio of devices will help make up for an estimated 30 percent drop in revenue

The company argues that its 3G Microcell technology and the $18 billion in planned network upgrades this year alone will help it meet the insane data consumption brought on by the iPhone users. However, most iPhone users won’t pay notice to those advancements if they can’t establish a reliable 3G connection or if 30 percent calls are dropped, as is the case in the New York City.

However, AT&T remains mum on the matter of telephony apps like Google Voice that are the litmus test of its openness. In my opinion, a 4G-iPhone version will coincide nicely with Verizon’s plan to unleash the first commercial 4G network in the U.S. in 2010. The timing will be perfect and I can see the vast majority of AT&T’s iPhone subscribers switching over to Verizon, especially people who switched to AT&T just to get the iPhone.

What about you? Will you be switching from AT&T back to Verizon if it begins offering the iPhone? Chime in with your comments below.

Reader Comments

John

Will Verizon have 4G coverage in all cities or just a hand full?
How could that work?
Will there be a CDMA and LTE chip inside the Verizon Iphone?
What will Verizon charge for the Iphone service?
I keep reading about VZW getting the Iphone but no one can explain how that can happen in 2010. If Apple does put a CDMA chip in the Iphone we all have to remember that CDMA can’t handle voice and data at the same time. I have a VZW phone for work and I had to hang up to send an Email today. With GSM there’s no need to hang up

Jeff

Yes will switch I love my iPhone 3G s but the calls drop all the time I can not imagine anyone staying with AT&T if they do not have iPhone I would switch in aminute even pay to get out of contract but I would never have another phone except iPhone so if it is not offerd by the others carriers AT&T will always have my business they would die without iPhone

Michael

I honestly can’t wait for this. I purchased and iPhone 3g when it came out and enjoyed it until I saw how few 3g spots there were. When I signed up there was an error somewhere in their system and my first bill was over $7000 (I was using a music service streaming over the 3g) – even though I had purchased the $30/month unlimited data plan. It took months to sort through everything and I haven’t felt comfortable with them since.

adam

@john:

i’ve had an iphone 3g for a year now, and every time i’ve been on a call and tried to use data services it’s informed me that i can only do one at a time. i’m not sure that gsm can’t do both data and voice simultaneously, but i know that the iphone can’t.

zerocool

@adam:

It could be an iPhone and/or AT&T thing since I have no problems doing both at the same time with my Tilt on T-Mobile…

http://roorback.com Aidan Cole

Apple and AT&T are bound together in holy matrimony until the Mayan calendar ends and takes the world with it. Some are watching this game of legal Pong with drooling fascination, waiting to see if AT&T will have its ass handed to it in court. I am too busy watching my iPhone and waiting for a signal. Call me when Apple comes to its senses. Or when the world is ending. Whichever comes first.